SC quashes ₹363cr GST demand against Vodafone Idea
What's the story
The Supreme Court of India has upheld a Bombay High Court order quashing a ₹363 crore Goods and Services Tax (GST) demand against Vodafone Idea. The case was related to its erstwhile entity, Vodafone Mobile Services Ltd (VMSL). A bench comprising Justices J.B. Pardiwala and K. Vinod Chandran dismissed the tax department's plea, saying that tax proceedings cannot continue against a non-existent company post-merger.
Background
Case related to sale of VMSL's telecom tower business
The GST proceedings against VMSL stemmed from the sale of its telecom tower business as a going concern.
On November 13, 2017, VMSL had signed an agreement with ATC Telecom Infrastructure to sell its entire tower business on a slump-sale basis.
Later, on August 30, 2018, the company merged with Vodafone India Ltd and Idea Cellular under an NCLT order.
The merger was also communicated to GST authorities when Idea Cellular's GST registration was amended.
Investigation
GST authorities issued ₹363 crore demand to VMSL
In February 2024, the Directorate General of GST Intelligence started investigating VMSL. On August 1, it issued a show-cause notice to the company demanding ₹363 crore along with a penalty.
The department claimed that the transfer of business as a going concern was an exempt supply and VMSL wasn't entitled to input tax credit.
However, VMSL challenged these proceedings on grounds that it had already ceased to exist after its merger in 2018 and couldn't be subjected to new proceedings.
Appeal
Centre argued against high court's ruling
The Centre invoked Section 87 of the CGST Act, arguing that this provision allows GST liabilities of companies involved in a merger to be dealt with even after the merger.
However, the high court rejected this argument in its April 29, 2026, order. It ruled that Section 87 doesn't empower the department to issue a notice against an entity that has already ceased to exist.
The Centre then approached the Supreme Court for relief.
Precedent
Supreme Court referred to its earlier judgment
The Supreme Court referred to its July 25, 2019 judgment in the Maruti Suzuki India Ltd tax case.
In that instance, the top court had ruled that tax proceedings against a company that had ceased to exist after an amalgamation were invalid, especially when the tax authorities were aware of the merger.